New issue brief: “Do Income Taxes Affect the Progressivity of Social Security?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

"Do Income Taxes Affect the Progressivity of Social Security?" by Norma B. Coe, Zhenya Karamcheva, Richard Kopcke, and Alicia H. Munnell

The brief’s key findings are:

• Low earners receive much more in Social Security benefits than they pay in Social Security taxes, reflecting the program’s progressive design.

• The interaction between Social Security provisions and income taxes has little net effect on the program’s progressivity:
  • the exemption of employers’ Social Security contributions from workers’ income taxes makes the system less progressive, but
  • the income taxation of retirees’ Social Security benefits makes the system more progressive.

• Over time, the income tax effects will add to progressivity because an increasing percentage of retirees will pay taxes on their benefits.

The brief is available here.